A replacement must always be in the best interest of the client. Clients have a right to understand the nature and consequences of the replacement before a contract is replaced. Brokers have a regulatory requirement to provide documentation to demonstrate why changes to the existing policy would not meet the policy owner’s needs

Replacement refers to any transaction where new insurance coverage is purchased that replaces or intends to replace other insurance coverage that has been or will be terminated or changed (contractual conversion options excluded).

It is highly recommended that Brokers maintain sufficient information in Client Files to demonstrate the appropriateness of any sale or advice given. Brokers should maintain their records in sufficient detail to demonstrate their obligations to the client have been met. Signed copies of replacement documents should be retained in the Broker File. For your convenience, HUB has prepared an outline that you may find useful in preparation of the supporting explanation to accompany the Life Insurance Replacement Document (LIRD) document. We encourage you to reference HUBLINK for additional information and guidance.

Remember,
Good Business is Compliant and Compliance Matters!